Supreme Court Digest
By Prof. Daniel D. Blinka & Prof. Thomas J.
Hammer
| Civil Procedure | Insurance | Taxation |
Civil Procedure
Frivolous Actions - Wis. Stat. § 814.025
Juneau County v. Courthouse Employees
Local 1312, No. 96-2816 (filed 4 Nov. 1998)
Juneau County commenced a declaratory judgment action pursuant to
Wis. Stat. section
806.04, seeking a declaration that the interest arbitration
provisions of Wis. Stat. section
111.70(4)(cm)6.a apply only to school district professional
employees (not to other county or other municipal employees) and thus do
not require Juneau County to participate in binding interest arbitration
with the various union respondents in this case because none of their
members are school district professional employees. The unions responded
that the binding interest arbitration provisions of the statute apply to
all county and municipal employees and that certain amendments to the
statute enacted in 1993 and 1995 merely limit the circumstances under
which binding interest arbitration is available to school district
professional employees.
Juneau County moved for judgment on the pleadings, but the circuit
court concluded that the statute was ambiguous and ordered the county
and the unions to supplement the pleadings with materials relating to
the intention of the legislature when it amended the statute. The county
did not submit additional materials but the unions did. Following their
unsuccessful attempt to get the county to voluntarily dismiss the
action, the unions moved for summary judgment, seeking attorney fees and
costs on the ground that the county's action was frivolous.
The circuit court granted the motion, concluding that commencing the
declaratory judgment action was not frivolous but that continuing the
action became frivolous after the unions submitted evidence of
legislative intent and offered not to seek attorney fees or costs if the
county would voluntarily dismiss the action with prejudice. The court of
appeals affirmed that part of the judgment holding that the commencement
of the action was not frivolous and reversed that part of the judgment
holding that continuation of the action was frivolous.
The only issue before the supreme court was whether the commencement
or continuation of the declaratory judgment action by the county or its
attorneys was frivolous. This required the court to decide whether the
action was commenced or continued "without any reasonable basis in law
or equity." See Wis. Stat. §
814.025(3)(b). In a unanimous decision authored by Chief Justice
Abrahamson, the court held that neither the commencement nor
continuation of the action was frivolous.
A claim is frivolous when a party or attorney knew or should have
known that the claim lacked any reasonable basis in law and equity. A
court uses an objective standard to determine whether an action is
frivolous. The standard is whether the attorney knew or should have
known that the position was frivolous as determined by what a reasonable
attorney would have known or should have known under the same or similar
circumstances. Doubts about frivolousness should be resolved in favor of
the litigant or attorney because it is only when no reasonable basis
exists for a claim or defense that frivolousness exists.
After examining the various extrinsic aids for statutory
interpretation that the unions submitted, the supreme court concluded
that this case was a close one. However, considering all the factors and
resolving doubts about frivolousness in favor of the county, the court
concluded that the county's position that a judicial determination was
needed was not an unreasonable conclusion. Although persuasive, the
extrinsic aids did not conclusively tie the legislative intent to the
statutory language at issue in this case and, on final analysis, the
court could not conclude that no reasonable basis existed for Juneau
County's action.
[Note: The circuit court agreed with the unions regarding the scope
of the interest arbitration statute at issue in this case. That part of
the judgment was never appealed.]
Insurance
Uninsured Motorist Coverage - Uninsured Owners -
Wis. Stat. § 632.32
Hull v. State Farm Mut. Auto. Ins.
Co., No. 97-0659 (filed 15 Dec. 1998)
Hull's husband was killed while working at a car auction when he was
struck by a truck with poor brakes. The truck was driven by Borth, who
was employed by the auction company, Badger State, which in turn was
insured by Milwaukee Mutual. The truck's owner had consigned it to
Badger State for auction. The owner had no insurance covering the truck
or its operation. The Hulls were insured under two State Farm policies
that carried uninsured motorist (UM) coverage. Hull sued State Farm,
claiming that she was entitled to UM benefits under both policies: the
owner had no insurance and had negligently maintained the truck. State
Farm countered that the truck did not fit within the policies'
definition of "uninsured motor vehicle" because its use at the auction
was covered by Milwaukee Mutual. The circuit court ruled that the truck
was insured and thus Hull was not entitled to UM coverage. The court of
appeals affirmed.
The supreme court, in an opinion written by Justice Crooks, reversed.
First, Hull was entitled to UM coverage under the plain meaning of the
policies. The court held that under the policies the word "or" in the
phrase "ownership, maintenance or use" should be interpreted
disjunctively. In short a vehicle is "uninsured" in three situations:
"(1) when its ownership is uninsured; (2) when its maintenance is
uninsured; (3) when its use is uninsured."
Second, Hull also was entitled to UM coverage under section
632.32(4) of the Wisconsin Statutes which requires "UM coverage
whenever either the owner or the operator of a motor vehicle is
allegedly negligent and is not covered by liability insurance." In this
case, Hull had alleged that the owner's negligent maintenance of the
truck contributed to her husband's death. The supreme court also
overruled Hemerley v. American Family Mut. Ins. Co., 127 Wis.
2d 304, 379 N.W.2d 860 (Ct. App. 1985). The Hemerley "definition of
'uninsured motor vehicle' in situations like the current one, in which
there is more than one alleged tortfeasor, would contravene the purpose
underlying sec. 632.32(4)." The multiple tortfeasors in this case were
the owner and the driver, Borth. The court held that the statute
"requires UM coverage whenever either the owner or the operator of a
motor vehicle is allegedly negligent and is not covered by liability
insurance."
Taxation
Franchise Tax - "Nondiscriminatory" Tax
American Family Mut. Ins. Co. v.
Wisconsin Dep't of Revenue, No. 97-1105
American Standard Ins. Co. of Wisconsin
v. Wisconsin Dep't of Revenue, No. 97-1106 (filed 16 Dec. 1998)
American Family Mutual Insurance Company and its wholly owned
subsidiary American Standard Insurance Company of Wisconsin are both
subject to the Wisconsin franchise tax. This tax is imposed on an
insurer for the privilege of exercising its franchise or doing business
in this state in a corporate capacity.
The sole issue before the supreme court was whether the state
franchise tax is a "nondiscriminatory franchise tax" within the meaning
of 31 U.S.C. section 3124(a)(1) (1991). The significance of the
resolution of this issue for the insurance companies is: if the
franchise tax is a "nondiscriminatory franchise tax," interest income
from federal obligations may be included in the calculation of their
franchise tax obligations.
A state franchise tax is discriminatory within the meaning of the
statute cited above if the calculation of the tax includes interest
income from federal obligations but not from state obligations. State
franchise taxes that are calculated by including income from both state
and federal obligations have been upheld by the courts. In a unanimous
decision authored by Chief Justice Abrahamson, the supreme court applied
these standards and concluded that the Wisconsin franchise tax is a
"nondiscriminatory franchise tax."
Prof. Daniel D. Blinka and Prof.
Thomas J. Hammer invite comments and questions about the digests. They
can be reached at the Marquette University Law School, 1103 W. Wisconsin
Ave., Milwaukee, WI 53233, (414) 288-7090.
Wisconsin Lawyer